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An Investigation of Some Macro-Financial Linkages of Securitization

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Author Info

  • Xin Long
  • Mangal Goswami
  • Andreas Jobst

Abstract

Policy-makers have attributed the scale of the credit crisis and its profound impact on money markets (as well as financial sector stability) to the fast rise of securitization and the way it has arguably complicated both the conduct of monetary policy and the effect of interest rate transmission to the real economy. In our study, we examine whether financial innovation, specifically through securitization, has altered the nature of some macro-financial linkages, often with considerable policy implications. We find that securitization activity in the United States (mature market) and South Africa (emerging market) has indeed dampened the interest rate elasticity of real output via the balance sheet channel (while decreasing the interest rate pass-through from policy rates to market rates). That being said, current reservations about securitization do not invalidate the fact that securitization activity helps cushion the immediate impact of interest rate shocks to loan origination, which might be particularly effective in EM countries where poorly developed capital markets provide few alternatives to bank lending.

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Bibliographic Info

Paper provided by International Monetary Fund in its series IMF Working Papers with number 09/26.

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Length: 46
Date of creation: 01 Feb 2009
Date of revision:
Handle: RePEc:imf:imfwpa:09/26

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Related research

Keywords: Money markets; Market interest rates; Emerging markets; Economic models;

This paper has been announced in the following NEP Reports:

References

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  1. Bernanke, Ben & Gertler, Mark, 1995. "Inside the Black Box: The Credit Channel of Monetary Policy Transmission," Working Papers 95-15, C.V. Starr Center for Applied Economics, New York University.
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Cited by:
  1. Nephil Matangi Maskay Ph.D. & Rajendra Pandit, . "Macro-Financial Link and Monetary Policy Management: The Case of Nepal," NRB working Paper 07/2010, Nepal Rastra Bank, Research Department.
  2. Nephil Matangi Maskay Ph.D. & Rajendra Pandit, 2011. "Macro-Financial Link and Monetary Policy Management: Insight from the Case of Nepal," NRB Economic Review, Nepal Rastra Bank, Research Department, vol. 23(2), pages 1-17, October.
  3. Nephil Matangi Maskay Ph.D. & Rajendra Pandit, 2010. "Interest Rate Pass-Through in Nepal," NRB Economic Review, Nepal Rastra Bank, Research Department, vol. 22, pages 1-18, April.

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